HR6956-119

What This Bill Does

The BARCODE Efficiency Act targets the IRS paper-processing backlog by requiring paper-filed tax information to be made machine-readable where the return was prepared electronically but printed and mailed. In the introduced version, those returns must bear a scannable code; in the reported version, they must be formatted to work with IRS scanning technology. The IRS must use that technology to convert the return data into electronic format.

The bill also covers returns that were not prepared electronically and paper correspondence received by the IRS, except correspondence already received electronically. The Treasury Secretary or delegate can decline to use the scanning requirement if the technology is slower or less reliable than manual transcription or another IRS process. That exception cannot take effect until Treasury reports the determination to the House tax-writing committee and Senate Finance Committee within 30 days.

The bill phases in the requirement by filing type. Individual income tax returns are covered if received on or after January 1 of the first calendar year beginning more than 180 days after enactment. Estate and gift tax returns are covered after a longer period of more than 24 months. Other returns and correspondence are covered after more than 18 months.

Who Benefits and How

Taxpayers submitting paper-filed returns benefit if scanning reduces transcription errors, refund delays, and lost correspondence. Tax professionals benefit because electronically prepared returns that are mailed on paper can still enter IRS systems without full manual keying. IRS paper-processing operations benefit from a statutory push toward scanning technology and machine-readable formats. Tax software providers benefit because return-formatting rules can create demand for compatible printed-return outputs. Congressional tax committees benefit from required reports when Treasury decides scanning is slower or less reliable.

Who Bears the Burden and How

IRS scanning staff must procure, operate, and validate scanning technology for returns and correspondence. Treasury officials must decide when exceptions are justified and report those exceptions within 30 days. Tax software providers may need to update print formats so electronically prepared paper returns scan accurately. Taxpayers who still file paper returns may need to use formats that preserve machine readability. Estate and gift tax administrators must adapt after the 24-month phase-in.

Key Provisions

• Requires electronically prepared paper-filed federal tax returns to be formatted for IRS scanning.
• Requires the IRS to convert covered paper return data into electronic format using scanning technology.
• Provides exceptions when scanning is slower or less reliable than manual or other IRS processes.
• Requires Treasury to report any exception to congressional tax committees within 30 days.
• Applies individual income tax return rules after the first calendar year beginning more than 180 days after enactment.
• Applies estate and gift tax return rules after the first calendar year beginning more than 24 months after enactment.
• Applies other returns and paper correspondence after the first calendar year beginning more than 18 months after enactment.